Lakes Blue Energy has completed drilling and begun production testing at its Wombat-5 well, while progressing plans for proof-of-concept drilling at the Portland Energy Project targeting up to 1 trillion cubic feet of gas.
- Wombat-5 wellhead installed and production testing commenced
- Portland Energy Project drilling planned for second half of 2026
- Appointment of experienced General Manager of Operations
- Cash balance of $5.7 million supports ongoing activities
- Legal disputes over Wombat-5 drilling costs totaling under $3.4 million
Wombat-5 Well Moves Into Production Testing Phase
Lakes Blue Energy NL (ASX, LKO) has marked a significant milestone in its Gippsland Basin operations with the completion of drilling activities at the Wombat-5 appraisal well and the commencement of production testing in January 2026. The well, drilled to a depth exceeding 3,000 metres with a substantial horizontal section, encountered multiple gas-bearing sandstone packages, reinforcing confidence in the reservoir's quality and continuity.
The installation and pressure testing of the wellhead during the December quarter signalled the transition from drilling to testing, with the rig demobilised and all necessary approvals secured. The production testing program aims to evaluate the deliverability, pressure behaviour, and gas composition of the principal gas zones, with an extended test planned to provide critical data for future development decisions.
Portland Energy Project Advances Toward Drilling
Beyond Gippsland, Lakes Blue Energy is advancing its Portland Energy Project in the Otway Basin, Victoria, which holds prospective recoverable gas resources estimated at over one trillion cubic feet. The company is progressing regulatory, environmental, and stakeholder engagement activities in preparation for potential proof-of-concept drilling scheduled for the second half of 2026, subject to approvals.
This staged approach targets both unconventional gas in the Eumeralla Formation and conventional reservoirs in the Waarre Sandstone, reflecting a strategic effort to diversify and expand the company’s gas portfolio within Victoria’s onshore basins.
Strengthening Operational Capability and Portfolio Diversification
Lakes Blue Energy has bolstered its operational leadership with the appointment of Michael McGowan as General Manager of Operations. With over 35 years of international oil and gas experience, including senior roles at BP and Santos, McGowan is tasked with overseeing ongoing appraisal and development activities, particularly at Wombat-5 and Portland.
The company also continues to evaluate its Nangwarry CO₂ Project in collaboration with Maison Group Pty Ltd, exploring industrial gas market opportunities complementary to its natural gas assets. Additionally, Lakes maintains interests in Queensland’s Surat Basin and Papua New Guinea’s Buna Prospect, alongside royalty interests in South Australia’s Arrowie Basin and the Otway Basin, providing diversified exposure across multiple jurisdictions and resource types.
Financial Position and Legal Challenges
Financially, Lakes Blue Energy ended the quarter with $5.7 million in cash, having used $4.7 million primarily on Wombat-5 exploration and evaluation activities. The company remains in formal legal disputes with two unrelated suppliers over costs related to the Wombat-5 drilling program, with the total disputed amount estimated at less than $3.4 million. While these disputes introduce some uncertainty, the company’s cash position and recent capital raises provide a solid foundation to support ongoing operations and planned drilling activities.
At its November 2025 Annual General Meeting, shareholders approved all resolutions, including share placements and director re-election, reinforcing governance stability as the company advances its operational agenda.
Bottom Line?
As production testing at Wombat-5 unfolds and Portland drilling plans progress, Lakes Blue Energy stands at a pivotal juncture that could reshape its role in Victoria’s onshore gas market.
Questions in the middle?
- Will Wombat-5 production testing confirm commercial flow rates to justify field development?
- How will regulatory approvals impact the timing and scope of drilling at the Portland Energy Project?
- What are the potential financial and operational implications of the ongoing legal disputes?